Articles

Same Day ACH: Low Threshold Limits Corporate Adoption

By Andrew Deichler

Published: 4/27/2017

AUSTIN, Texas -- Although ACH transactions are expected to continue to increase, some corporate treasury professionals attending Faster Payments 2017 expressed apprehension about adopting NACHA’s Same Day ACH service. The primary reason appears to be the $25,000 limit on transactions.

During a panel session, Julie Walker, senior treasury analyst and card and payments specialist for REI, noted that 75 percent of her company’s AP payments are made via ACH, and the retailer wants to reach 100 percent. However, the $25,000 threshold has kept REI from exploring Same Day ACH for outgoing payments for anything other than payroll.

Walker added that one area where REI would very much like to use Same Day ACH would be in paying federal taxes. In instances where REI makes an error in paying taxes or misses a payment, the retailer has to make a quick payment to correct it to avoid significant penalties. “However, again, the $25,000 threshold would preclude us from doing that,” she said. “So we’re really advocating for an increase in that minimum, and that the federal government become eligible to use Same Day ACH.”

This led to one attendee remarking that the $25,000 limit is an indication that the corporate treasury space did not really seem to have much of a voice during the development process of Same Day ACH. Walker responded that she is actually part of a NACHA’s board advisory committee and she believes that NACHA is hearing the concerns from corporates about the limit. “I’m very fortunate as a corporate to have a voice for merchants,” she said.

Nevertheless, moderator Gene Neyer, head of product management, global transaction banking solutions for D+H added that The Clearing House has discussed increasing its initial $25,000 limit for its upcoming Real Time Payments (RTP) system to $100,000 within a year of its launch. “I’m not hearing any such discussion about ACH,” he said.

Another reason for some slow uptake of Same Day ACH among corporates may also be a lack of education on the service from banks. Walker said that she has not observed banks being proactive about providing information on it to their clients. “Actually, I didn’t know any details until I called my bank,” she said.

One practitioner in attendance noted that some banks have been better about educating their corporate clients than others. “But even if they handled things on the credit side pretty well, it doesn’t mean that it will be the same on the debit side,” he said.

Mary Ann Francis, executive business advisor, global treasury, payments and blockchain solutions for Wipro LTD, agreed that there has been a lack of education from the banks for corporate end-users. “The banks are very educated and informed, but it doesn’t sound like the end-user is, or that the potential for Same Day ACH is being discussed,” she said. “And I think that’s leading some people to be in denial and not act upon it.”

Francis has also observed hesitation to adopt Same Day ACH from some corporates due to the fact that they are still using legacy systems and making batch payments. “We live in a batch world, and that’s part of the problem with any of the real-time conversations, let alone same-day,” she said. “If a credit shows up at 4 p.m., that doesn’t mean it can get posted and it doesn’t mean that the AR system can get updated as well. It’s just like the blockchain conversation—just because you want to use it, doesn’t mean it’s going to work in your back office.”

On that note, there’s still a sentiment of, “if it ain’t broke, don’t fix it” among some practitioners. As Theresa Press, project manager for Cigna said in a separate session, standard ACH has worked remarkably well for her needs. She said that her organization may eventually use Same Day ACH but for now she is “sticking to [her] guns and using traditional ACH.”

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